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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
During the past 13 years, the highest Beneish M-Score of Forest Laboratories Inc was 0.00. The lowest was 0.00. And the median was 0.00.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Forest Laboratories Inc for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 1.0263||+||0.528 * 0.9991||+||0.404 * 1.1093||+||0.892 * 1.1758||+||0.115 * 0.6172|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0841||+||4.679 * -0.0244||-||0.327 * 2.8703|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|Accounts Receivable was $577 Mil.|
Revenue was 1092.278 + 878.396 + 855.255 + 832.935 = $3,659 Mil.
Gross Profit was 842.991 + 696.126 + 691.537 + 667.568 = $2,898 Mil.
Total Current Assets was $4,124 Mil.
Total Assets was $12,018 Mil.
Property, Plant and Equipment(Net PPE) was $372 Mil.
Depreciation, Depletion and Amortization(DDA) was $311 Mil.
Selling, General & Admin. Expense(SGA) was $1,986 Mil.
Total Current Liabilities was $1,511 Mil.
Long-Term Debt was $3,000 Mil.
Net Income was 54.084 + 17.961 + 69.987 + 23.278 = $165 Mil.
Non Operating Income was 0 + 0 + -7.801 + -4.164 = $-12 Mil.
Cash Flow from Operations was 140.031 + 202.934 + 156.134 + -28.196 = $471 Mil.
|Accounts Receivable was $478 Mil.
Revenue was 813.826 + 716.281 + 760.637 + 821.127 = $3,112 Mil.
Gross Profit was 636 + 562.97 + 610.914 + 652.904 = $2,463 Mil.
Total Current Assets was $2,948 Mil.
Total Assets was $7,630 Mil.
Property, Plant and Equipment(Net PPE) was $377 Mil.
Depreciation, Depletion and Amortization(DDA) was $147 Mil.
Selling, General & Admin. Expense(SGA) was $1,558 Mil.
Total Current Liabilities was $998 Mil.
Long-Term Debt was $0 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(576.854 / 3658.864)||/||(478.032 / 3111.871)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(2462.788 / 3111.871)||/||(2898.222 / 3658.864)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (4123.712 + 371.815) / 12017.531)||/||(1 - (2947.786 + 376.96) / 7629.582)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(147.269 / (147.269 + 376.96))||/||(310.652 / (310.652 + 371.815))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(1986.229 / 3658.864)||/||(1558.306 / 3111.871)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((3000 + 1510.669) / 12017.531)||/||((0 + 997.691) / 7629.582)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(165.31 - -11.965||-||470.903)||/||12017.531|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
Forest Laboratories Inc has a M-score of -3.04 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
Forest Laboratories Inc Annual Data
Forest Laboratories Inc Quarterly Data